Gold verus Palladium miners.
The price of gold is heavily manipulated and largely based on sentiment of traders and gold investors. In contrast, palladium prices are largely determined by industrial demand, around 70% of which is based on usage in catalytic converters, although other uses (e.g., Jewelry) are also significant. Palladium metal prices are decoupled from and do not correlate with gold/silver prices. Hence, investing in palladium miners does not carry the same macro factors as are involved in gold/silver miners. For the last couple years, palladium demand has been increasing and prices have had good support and are experiencing an uptrend that is expected to last at least until 2017.
Russia and South Africa account for the lion's share of palladium production, although Russian mining has been experiencing a depletion and South African miners have been lagging due to labor unrest and political issues. North American Palladium (PAL) is a Canadian miner, which is one of the two largest palladium mines in the world.
Palladium miner, $PAL good entry now for a medium swing trade, now to mid-August. On Friday PAL announced financing to allow them to finish Phase 1 of expansion of their existing LDI mine in Ontario. Popped last Friday 1.10 to 1.33, then a fade selloff which was way overdone at the close because of 15 percent interest terms in the deal. However, North American Palladium is very close to finishing phase 1 expansion -- already 750 feet out of the 850 feet shaft is complete and aboveground processing equipment/facilities are complete. This will increase palladium production from current 160,000 oz/yr. by +50%. One of two major producing mines in world, COP currently $490/oz, will drop to high 200s after expansion.
Prior to financing deal stock had fallen $1.80 to $1.10 on fears that they would require severe dilution or go bankrupt. So 40c to 60c was priced into the stock because of the worst case risks when pps recently hit the range of $1.00 to $1.10. Now that phase 1 of expansion will be completed with new financing, the stock has now been de-risks and should run to $1.70-$1.80 as milestones are announced, beginning with announcement of shaft completion in August (already 750m towards 850m at completion). Eventually PAL will reach $2.50 after phase 1 expansion in full operation. Remember, PAL is already producing 160,000 oz/yr and palladium metal prices are driven by industrial demand growth for catalytic converters.
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